PKA bungled the project, says report
(NST) KUALA LUMPUR: The audit report on the Port Klang Free Zone (PKFZ) released yesterday concluded that weak governance and project management by the Port Klang Authority (PKA) were the two major factors that severely undermined the viability of the project.
One example of weak governance stated in the report was when PKA failed to alert the cabinet about its inability to finance the project. The government was only alerted in 2007.
According to the report by PricewaterhouseCoopers (PwC), PKA had realised since May 2004 that it would be unable to meet the cabinet's condition of self-financing. Compounding the issue, PKA entered other significant development agreements thereafter.
Other weaknesses in governance included:
– Key agreements were not submitted to the board for approval. The agreements were signed under common seal without prior authorisation.
– Variation orders (approved changes in the specifications of a project) totalling RM62.5 million had been accepted to date by PKA management without referring to the board.
– Appointment of key project consultants were made by PKA management without the approval of the board.
– The board was not consulted on the acceptance of the land without the main contractor Kuala Dimensi Sdn Bhd (KDSB) completing infrastructure works and on how the price adjustment was to be effected.
Other oversights by PKA include the bypassing of various government checks and balances. These include:
– Agreements were not vetted by the Attorney-General's Chamber despite the significant cost.
– Treasury guidelines on vetting agreements by the attorney-general and approval of variation orders by the Finance Ministry were not adhered to.
– Letters of support, which could be construed as guarantees, were issued by the transport minister without Finance Ministry approval.
– PKA did not adhere to Finance Ministry stipulations when issuing government guaranteed bonds for the development of the project.
On the issue of weak project management, the report stated that the key lapses were:
– Entering contracts on the basis of estimated amounts and without detailed building plans.
– Development contracts totalling RM1.8 billion were awarded to the main developer KDSB without competitive bids.
– The appointment of a quantity surveyor nine months after construction commenced.
